South Korea Q1 household credit growth accelerates, fastest since late 2006

[SEOUL] South Korea's household credit in the March quarter rose at the fastest annual pace in nearly nine years, central bank data showed on Wednesday, accelerating for a seventh straight quarter as easy monetary policy has kept borrowing rates at a record low.

Household credit during the first quarter of this year, including loans and other debt owed by South Korean households jumped 11.4 per cent compared to a year ago from 1,098.3 trillion won (S$1.28 trillion) to a total of 1,223.7 trillion won, preliminary Bank of Korea data showed.

This sped up from a revised 10.6 per cent growth on-year seen in the fourth quarter of last year and was the fastest growth since a 11.8 per cent rise in the fourth quarter of 2006.

In monthly terms, household credit inched up 1.7 per cent in the first quarter.

Similar to the previous quarter, household loans were mainly to blame for the sharp increase as they jumped 11.5 per cent to 1,158.5 trillion won in the January-March period from a year earlier.

The household credit data from the first quarter showed the bulk of the debt was incurred for housing. Many South Koreans have opted to borrow more for homes as the Bank of Korea lowered its policy rate four times between August 2014 and June last year to the current 1.50 per cent.

Both the Bank of Korea and finance ministry have been adamant that household debt is not likely to pose risks to the financial system anytime soon, but authorities have been monitoring the situation closely.

Meanwhile, the same data showed the outstanding amount of purchases on credit rose 10.5 per cent on-year in the first quarter, accelerating from a 8.1 per cent growth in the fourth quarter of last year.

The first quarter credit growth rate matched the expansion seen in the third quarter of last year, supporting policymakers'comments that consumption has been recovering steadily.

REUTERS